SAVE FOR A DOWN PAYMENT

Your mortgage payment is only one piece of the puzzle. It’s also important to make a sizable down payment, which will save you a good chunk of money over the life of your loan. Here’s how:

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• A down payment of 20% or more will exempt you from private mortgage insurance.

   (PMI). PMI is typically required with a down payment of less than 20%. The cost of PMI coverage is based on risk factors, such as your DTI and credit score. It’s an expense that any homeowner would prefer not to have.

 

• A bigger down payment will often result in a lower interest rate; that’s because a lower Loan to Value Ratio (LTV).

•  decreases your lender’s risk.

 

• The bigger the initial payment against principal, the less interest a borrower will pay over the life of the loan, potentially saving thousands of dollars.

 

• A bigger down payment results in smaller monthly payments because you owe less on the house.

 

• Smaller monthly payments could positively influence future borrowing power, which means you’re more likely to qualify for a car loan, credit or other financing.

Tips For Saving

 

1. Build a budget: It’s hard to save money when you don’t even know where it’s going. By developing a budget and tracking your outflow, it’s easy to see where you can plug the holes – perhaps by eating out less or putting a moratorium on online shopping.

 

2. Set up automatic savings: You’ve heard the adage “pay yourself first.” By setting up automatic savings through your bank account, it can be easier to save that money because you’ll never even see it.

 

3. Get a side gig: Whether you can tutor kids or deliver food for nearby restaurants, there’s likely something you can do to earn some extra cash to put towards that down payment. This also could be a good time to find out about some “passive income” opportunities that can help you build your bank account 24/7.